The more than 20% year-to-date decline in the S&P 500 could be nearing its end as pre-conditions for a stock market bottom are starting to form.
The Federal Reserve issued another 75 basis point interest rate hike last week in an effort to tame inflation, which caused the stock market to sell off.
Inflation is likely to start showing more concrete signs of peaking according to the man who has remained bullish throughout the market decline. A number of corporations are issuing profit warnings because of the falling oil prices.
The phase of strong payrolls will likely move behind us and inflation will stay elevated.
Peaking inflation and attractive equity valuations suggest a market bottom is imminent.
The investors are becoming more bearish on the stock market. Only 17.7% of AAII's respondents were bullish on stock prices over the next six months.
According to data from Fundstrat, the investor sentiment survey's spread between the bulls and bears is the fourth worst since 1987. CNN's Fear and Greed index fell into the extreme fear zone with a reading of 18 out of 100.
On Friday, there was a record high in total put option trading, as investors piled into contracts to protect against further downside.
Sentiment readings that are too bearish serve as a catalyst that will cause stock prices to go up.
A dovish Fed pivot could spark the market higher over the next few months.
The next months should see some dovish tilt by the Fed. According to the note, a bounce in growth stocks would help to end the stock market's decline.
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